United States District Court, D. Massachusetts
KATHERINE FLEMING, EDWARD R. HADUCK, and VICTORIA WENDEL, Plaintiffs,
FIDELITY MANAGEMENT TRUST COMPANY and FIDELITY INVESTMENTS INSTITUTIONAL OPERATIONS COMPANY, INC., Defendants.
MEMORANDUM AND ORDER ON MOTION TO VACATE AND AMEND
JUDGMENT AND FOR LEAVE TO FILE AMENDED COMPLAINT
ALLISON D. BURROUGHS U.S. DISTRICT JUDGE
September 22, 2017, the Court granted Defendants' motion
to dismiss Plaintiffs' putative class action asserting
violations of the Employee Retirement Income Security Act of
1974 (“ERISA”) for failure to state a claim.
See Fleming v. Fidelity Mgmt. Trust Co., No.
16-cv-10918-ADB, 2017 WL 4225624 (D. Mass. Sept. 22, 2017),
ECF No. 54 (“MTD Order”). On October 20, 2017,
Plaintiffs filed the instant motion pursuant to Fed.R.Civ.P.
15(a), 59(e), and/or 60(b) to vacate and amend the judgment
and for leave to file an amended complaint. [ECF No. 56]. For
the reasons stated herein, the motion is DENIED.
Court assumes the parties' familiarity with the MTD Order
and therefore provides only a brief summary of that decision.
Plaintiffs are individual participants within the meaning of
ERISA, 29 U.S.C. § 1002(7), in the Delta Family-Care
Savings Plan (“Plan”). The Plan qualifies under
ERISA as both an employee pension benefit plan, 29 U.S.C.
§ 1002(2)(A), and an individual account plan, 29 U.S.C.
§ 1002(34). Defendants Fidelity Management Trust Company
(“FMTC”) and Fidelity Investments Institutional
Operations Company, Inc. (“FIIOC”) were hired to
provide certain services to the Plan. As trustee of the Plan,
FMTC holds the Plan's investment assets and executes
investment transactions, whereas FIIOC, a wholly owned
subsidiary of FMTC, provides trust services, record-keeping,
and information management services to the Plan. The assets
of the Plan are held in and invested through a Master Trust,
which is controlled in all material respects by a Master
Trust Agreement involving the Plan sponsor (Delta Air Lines,
Inc.), the named fiduciary (the Delta Air Lines, Inc.,
Benefit Funds Investment Committee), the Plan administrator
(the Administrative Committee of Delta Air Lines, Inc.), and
the trustee (FMTC).
original complaint essentially asserted two theories of
wrongdoing with respect to the Plan. First, it challenged the
relationship between Defendants and a third party, Financial
Engines Advisors, LLC (“FE”), which provides
investment advice services to individual Plan participants
for a fee. Plaintiffs asserted that Defendants and FE have
agreed to an improper “pay to play” arrangement
in that FE, in exchange for being included as the Plan's
investment advisor, agreed to pay Defendants a significant
percentage of the fees that FE collects from individual Plan
investors. According to Plaintiffs, Defendants hired FE and
controlled the negotiation of the terms and conditions under
which FE would provide its services to the Plan participants,
including the fee-sharing arrangement. This arrangement was
alleged to be unrelated to any substantial services performed
by Defendants and purportedly inflated the cost of investment
advice for Plan participants in violation of the fiduciary
responsibility and prohibited transaction provisions of
ERISA, 29 U.S.C. §§ 1104, 1106.
Court recognized that Plaintiffs' theory was premised on
the notion that Defendants, rather than Delta, hired or
selected FE, but concluded that the Master Trust Agreement
“compels the conclusion that Delta, not Defendants,
exercised final authority or control over the selection or
hiring of FE.” MTD Order at 14. Moreover, if Delta
believed that the fee-sharing arrangement between Defendants
and FE wrongfully inflated the cost of investment advice
services, the Court determined that Delta was free to decline
to hire FE or to terminate its relationship with both
Defendants and FE. Insofar as the original complaint
challenged the amount of the fees that Defendants collect
from FE, the Court held that Defendants were not acting in a
fiduciary capacity when they negotiated with plan sponsors
for their own compensation, finding it “difficult to
see how a service provider could be an ERISA fiduciary when
it negotiates a fixed rate of compensation from an entity
other than the Plan, as Plaintiffs allege here, ”
particularly given that the Complaint did not allege that
“once FE was hired, Defendants retained any authority
or control over the rate of compensation it would receive
from FE.” Id. at 15-16.
the original complaint attacked the portal,
“BrokerageLink, ” through which individual Plan
participants may invest their savings on a self-directed
basis. BrokerageLink allowed individuals to purchase an array
of securities, including a selection of mutual funds that are
not included among the Plan's designated investment
alternatives. Plaintiffs took issue with the specific classes
of mutual fund shares made available for purchase through
BrokerageLink. The original complaint alleged that Defendants
breached their fiduciary duty to the Plan by selecting only
higher-cost share classes (which typically include
revenue-sharing payments made to parties who distribute the
shares or provide other services) to be available through
BrokerageLink, while excluding lower-cost share classes,
thereby maximizing their revenue-sharing payments at the
expense of Plan participants.
Court accepted as true Plaintiffs' assertion that
Defendants were responsible for deciding which share classes
of mutual funds would be made available through BrokerageLink
but found this “product design” decision to be
wholly distinct from the decision to make BrokerageLink
available to individual Plan participants, which the Master
Trust Agreement showed rested solely with Delta. Id.
at 10. The Master Trust Agreement made clear that the Delta
entities, not Defendants, retained control over whether
BrokerageLink-and by extension the classes of mutual fund
shares offered through it-was available to Plan participants.
The Court further noted that there was no suggestion in the
original complaint that Delta lacked the authority or ability
exclude BrokerageLink as an offering if it determined that
the share classes available through BrokerageLink were
unsuitable for Plan participants. Accordingly, Defendants did
not exercise the type of authority or control over the
decision to include BrokerageLink in the Plan that would give
rise to ERISA liability.
now move to vacate the order of dismissal and to alter it to
be without prejudice, such that Plaintiffs may file their
proposed amended complaint [ECF Nos. 56, 57-1]. Defendants
oppose the motion on the grounds that Plaintiffs fail to meet
their burden to vacate and amend the judgment and that their
new allegations do not cure the deficiencies of the original
parties agree that Plaintiffs must satisfy the standards
under Federal Rules of Civil Procedure 59(e) and/or 60(b), as
well as Rule 15, to obtain the requested relief.
“Ordinarily, Rule 15(a) governs a motion to amend a
complaint. That rule directs that ‘[t]he court should
freely give leave [to amend] when justice so
requires.'” Fisher v. Kadant, Inc., 589
F.3d 505, 508 (1st Cir. 2009) (quoting Fed.R.Civ.P.
15(a)(2)). “If, however, a motion to amend is filed
after the entry of judgment, the district court lacks
authority to consider the motion under Rule 15(a) unless and
until the judgment is set aside.” Id. (citing
Palmer v. Champion Mortg., 465 F.3d 24, 30 (1st Cir.
2006)). “As long as the judgment remains in effect,
Rule 15(a) is inapposite.” Id. at 508-09.
Here, Plaintiffs filed the instant motion on October 20,
2017, after the entry of judgment on September 22, 2017. [ECF
Nos. 54, 55, 56]. For the purposes of deciding this motion,
it is of no consequence that Plaintiffs included in their
opposition to the motion to dismiss a one-sentence request
for leave to amend the complaint [ECF No. 28 at 32],
contingent upon the court dismissing the case. See
Fisher, 589 F.3d at 510 (“We hold that a passing
request for contingent leave to file an amended complaint,
made in an opposition to a motion to dismiss, is
insufficient, in and of itself, to bring a post-judgment
motion for reconsideration within the orbit of Rule
15(a).”); Gray v. Evercore Restructuring LLC,
544 F.3d 320, 327 (1st Cir. 2008) (contingent request for
leave to amend in opposition brief “does not constitute
a motion to amend a complaint”). The first question,
then, is whether the judgment may be set aside under,
“say, Rule 59(e) or Rule 60(b).” Fisher,
589 F.3d at 509.
filed the instant motion within the 28-day time period
prescribed by Rule 59(e). Fed.R.Civ.P. 59(e) (“A motion
to alter or amend a judgment must be filed no later than 28
days after the entry of the judgment.”). Under Rule
59(e), “relief is granted sparingly, and only when
‘the original judgment evidenced a manifest error of
law, if there is newly discovered evidence, or in certain
other narrow situations.'” Biltcliffe v.
CitiMortgage, Inc., 772 F.3d 925, 930 (1st Cir. 2014)
(quoting Global Naps, Inc. v. Verizon New England,
Inc., 489 F.3d 13, 25 (1st Cir. 2007)). For instance,
“a motion for reconsideration should be granted if the
court ‘has patently misunderstood a party . . . or has
made an error not of reasoning but apprehension.'”
Ruiz Rivera v. Pfizer Pharm., LLC, 521 F.3d 76, 82
(1st Cir. 2008). In “rare” circumstances,
district courts in this Circuit have recognized that a Rule
59(e) motion may be granted “to prevent manifest
injustice.” Trinidad v. City of Boston, No.
07-cv-11679-DPW, 2011 WL 915338, at *3 (D. Mass. Mar. 15,
Plaintiffs seek relief under Rule 60(b), which provides that
“the court may relieve a party . . . from a final
judgment, order, or proceeding, ” for, as relevant
here, “newly discovered evidence” or “any
other reason that justifies relief.” Fed.R.Civ.P.
60(b)(2), (6). Relief under Rule 60(b) is likewise
“extraordinary in nature, ” Karak v. Bursaw
Oil Corp., 288 F.3d 15, 19 (1st Cir. 2002), and should
be granted “sparingly, ” Cintron-Lorenzo v.
Departamento de Asuntos del Consumidor, 312 F.3d 522,
527 (1st Cir. 2002) (citation omitted), as “[s]uccess
under [Rule 60(b)] requires more than merely casting doubt on
the correctness of the underlying judgment.”
Fisher, 589 F.3d at 512. Plaintiffs, as the moving
parties, bear the burden of making the requisite showing
under Rule 59(e) or Rule 60(b). See Marie v. Allied Home
Mortg. Corp., 402 F.3d 1, 7 n.2 (1st Cir. 2005);
Fisher, 589 F.3d at 512.
Plaintiffs claim with minimal explanation that after issuance
of the MTD Order, they “worked diligently to find and
bring to light the facts that show this case satisfies the
pleading standard” and “determined that there was
evidence that could address the Court's concerns about
the original Complaint.” [ECF No. 57 at 4-5]. Yet, they
also claim that the Court identified missing allegations that
“Plaintiffs did not think needed to be pled-not because
the facts did not support the allegations, but because
Plaintiffs understood the law not to require them.”
Id. at 7-8. Plaintiffs further specify that ...